Carbon Credit

PGPM 2010

ISME Bangalore

Carbon Credits

20 August 2010

Shibna SulaimanWazid AliSampreeth Shivanna

Carbon Credits

PGPM 2010ISME Bangalore

Agenda

Carbon Credits - Overview Background Kyoto Protocol Clean Development Mechanism Carbon Credits In India Criticisms What can we do to reduce carbon emissions? Closing Comments References Questions

Carbon Credits


Overview Term assigned to reduction or offset of greenhouse gas emissions.

Key component of national and international attempts to mitigate the growth in concentrations of greenhouse gases (GHGs).

A permit that allows the holder to emit one tonne of carbon dioxide (CO2).

1 Carbon Credit = 1 tonne CO2 saved from the atmosphere

Credits are like certificates awarded to countries or groups that have reduced their green house gases below their emission quota

Projects that prevent the generation of greenhouse gases or remove greenhouse gases from the atmosphere earn these credits, which can in turn then be "sold" to other businesses and individuals to "offset" the emissions they generate.

Carbon Credits


Background

As nations have progressed we have been emitting carbon, or gases which result in global warming.

Burning of fossil fuels is a major source of industrial GHGs emissions.

The major GHGs are CO2 , CH4 , Nitrous Oxide, Hydro Fluoro Carbons etc

GHGs increase the atmospheric ability to trap infrared energy and thus affect the climate .

Increasing awareness for controlling emissions resulted in Carbon Credits.

Carbon Credits


Carbon Credits


Kyoto Protocol Developed under the UNFCCC( United Nations Framework Convention on Climate Change

(UNFCCC or FCCC), aimed at fighting global warming.

UNFCCC is an international environmental treaty with the goal of achieving "stabilization of GHGs.

Initially adopted on 11 December 1997 in Kyoto, Japan and entered into force on 16 February 2005

Goal was to see participants collectively reduce emissions of GHGs by 5.2% below the emission levels of 1990 by 2012.

If participants continue with emissions above the targets set by Kyoto Protocol, then they are required to engage in emissions trading; i.e. buying "credits" from other participant countries.

US and Australia have not signed the Kyoto Protocol.

In Copenhagen 2009 UNFCCC met to renew the Kyoto Protocol which runs out in 2012.

Carbon Credits


Kyoto Protocol Mechanisms

Carbon Credits


Clean Development Mechanism (CDM) Part of Kyoto Protocol

Purpose of CDM is to reduce emissions and contribute to sustainable development in developing countries.

Under the UNFCCC charter, any company from the developed world can tie up with a company in the developing country that is a signatory to the Kyoto Protocol.

Companies in developing countries must adopt newer technologies, emitting lesser gases, and save energy.

Only a portion of the total earnings of carbon credits of the company can be transferred to the company of the developed countries under CDM.

Carbon Emission Reduction (CER) = 1 tonne CO2 reduced. This is given by CDM Board.

Carbon Credits


CDM Stages Project Identification Host Country Approval Project Validation Project Registration CER Verification Issuance of CERs

Carbon Credits


CDM Case StudyAssume that BP is running a plant in the UK. Say, that it is emitting more gases than the accepted norms of the UNFCCC. It can tie up with its own subsidiary in, say, India or China under the CDM. It can buy the 'carbon credit' by making Indian or Chinese plant more eco-savvy with the help of technology transfer. It can tie up with any other company like Indian Oil , or anybody else, in the open market.

Later an audit will be done of their efforts to reduce gases and their actual level of emission. China and India should ensure that new technologies for energy savings are adopted so that they become entitled for more carbon credits which they can sell to their counterparts in Europe. This is how a market for carbon credit is created.

Every year European companies are required to meet certain norms, beginning 2008. By 2012, they will achieve the required standard of carbon emission. So, in the coming five years there will be a lot of carbon credit deals.

Carbon Credits


Carbon Credits in India - Facts India signed the Kyoto protocol in August 2002

India is the second-largest seller of carbon credits globally with 489 registered CDM projects till date (24% of total projects registered under CDM globally).

By 2012 Indian companies are expected to generate at least US$ 8.5 billion

The average annual CERs from registered projects during July 2008 to February 2009 grew by 20.92%

India consistently ranked no.1 on CDM country ranking for the past year. Over 75% of India’s CDM potential lies in the energy sector.

Carbon Credits


Carbon Credits in India - Challenges Even though India is the second largest generator of environment friendly

projects for carbon emission reductions, Indian companies hesitate to generate monetary benefits through trade.

Indian domestic firms, including the public and private hold back over 90 percent of such credits, as they are timid about the uncertainties in the global carbon market.

Indian companies are holding on to their CERs because they feel they would fetch them better prices later.

The lack of interest in future contracts is also primarily due to the small size of most projects.

Since the carbon revenues from small projects are comparatively low, companies are not really depending upon that incentive to upgrade themselves.

Carbon Credits


Carbon Credits in India – MSW Management According to CDM Board, the total CO2-equivalent emissions in India in

1990 was approximately 3% of global emissions.

Other than Industries and transportation, major sources of GHG’s emission in India:

• Paddy fields• Enteric fermentation from cattle and buffaloes• Municipal Solid Waste (MSW)

MSW can be treated and then converted into energy. This project can be executed using a Public-Private Partnership approach in which both the parties can invest and share the benefits.

Investment and operating cost is recovered through sale of CERs.

Carbon Credits


Carbon Credits in India - MSW Management Gaining annual CER revenues for the country Locally achieving:

• Reduction in poverty by creating jobs for urban poor.• Better environmental quality.• Enhanced public awareness on Solid Waste Management and

recycling.• Improvement in the quality of life of the city.• Efficient resource utilization• Considerable amount of power to the city.• Reduction in cost on Solid Waste Management by municipalities.

Globally achieving:• Foreign Direct Investment (FDI)• Reduction in emissions of GHG’s from dumping grounds which are

responsible for Global Warming.

Carbon Credits


Carbon Credits - Criticism Environmental restrictions and activities have been imposed on businesses through

regulation.

Kyoto mechanism is the only internationally agreed mechanism for regulating carbon credit activities. The Kyoto trading period only applies for five years between 2008 and 2012. There is general uncertainty as to what will be agreed in Post-Kyoto Protocol negotiations on greenhouse gas emissions. As business investment often operates over decades, this adds risk and uncertainty to their plans.

As several countries responsible for a large proportion of global emissions (notably USA, Australia, China) have avoided mandatory caps, this also means that businesses in capped countries may perceive themselves to be working at a competitive disadvantage against those in uncapped countries as they are now paying for their carbon costs directly.

There is no standard way of validating of CDM credits.

To get a CDM project approved it takes a lot of effort and time.

Carbon Credits


Reducing Carbon Emission Renewable energy such as wind farms, or installations of solar, small hydro, geothermal, and

biomass energy can all reduce carbon emission by displacing fossil fuels.

Afforestation - Establishing trees on previously unforested land.

Reforestation - Establishing trees on previously forested land which have been depleted.

Organizations should bring awareness among its employees by recording and publishing each employee’s carbon footprint.

It is also the duty of each individual to contribute towards the reduction of carbon emission. Some simple steps to reduce carbon emissions

• Drive less• Use solar energy• Plant more trees• Turn off electronic devices• Reuse and Recycle• Be a citizen not just a civilian.

Carbon Credits


Closing comments $ 60 Billion was the size of the global carbon credit market in 2007.

There is a great opportunity awaiting India in carbon trading which is estimated to go up to $100 billion by 2010 accounting to 25% of the total world carbon trade.

US, Germany, Japan and China are likely to be the biggest buyers of carbon credits

“Carbon Credits will be the world’s biggest market!” --- New York Times

Carbon Credits


References Carbon Credits – Wikipedia (www.wikipedia.org) Carbon Credit Mart Website (www.carboncreditmart.com) NSWAI (www.nswai.com) Carbon Credit Futures - Bhavana Glory, Research Desk, Karvy Comtrade

PGPM 2010

ISME Bangalore

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PGPM 2010

ISME Bangalore

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Carbon Credit